Captain Izham bin Ismail is a rare breed among large company CEOs. Not only is he extremely approachable, but he is also brutally honest about his business – good and bad
Captain Izham was appointed to lead struggling Malaysia Airlines in 2017. Tasked with transforming the carrier’s business model so it can compete in a region where it is hemmed in by stronger rivals, his title is Group Managing Director of the Malaysia Aviation Group and CEO of Malaysia Airlines.
In an onstage interview at Routes Asia in Langkawi in late February, he pointed out that he has been asked when MAS began to fail – it last made a profit in 2010 – and whether it was the emergence of low-cost carriers (such as AirAsia) that did the damage.
“It has been a chequered journey for Malaysia Airlines over the past 20 years,” he told delegates. “Reflecting on my journey as CEO over the last seven years, MAS started to fail in 1972. People don’t see that. The day the two governments of Singapore and Malaysia decided to split Malaysia-Singapore Airlines [the flag carrier of both states], with Singapore Airlines taking the international network and MAS becoming a domestic network operator, was the beginning of setting up MAS to fail.”
At first, with only five major carriers in the region to contend with in the 1970s and 1980s, MAS was OK, but as competition intensified it began to struggle.
Captain Izham, who joined MAS as a First Officer in 1980 and has been with the carrier for decades in gradually more senior roles, has seen leadership teams come and go, each seeking to make the airline profitable.
Formula for success
This has been an elusive mission, but Captain Izham believes his team has the formula to finally crack it. “For Malaysia Airlines to be competitive in the future it must have a very robust and competitive product in the marketplace,” he said.
Prior to the pandemic and during the dark days afterwards, MAS floundered, not having enough money even to pay salaries or bonuses, let alone improve its product. But the plan Izham is following is turning things around.
“Today, with 32 months of positive cash [flow], we have the cash needed for us to reinvest,” said Izham. “So, the current call to action within the organisation is to reinvest back to the product with things like seats, in-flight dining and in-flight entertainment systems.”
Enabling this call to action is a set of financial results, described as “handsome” by Izham in Langkawi, that give pause for thought to those who doubt MAS can find a profit-making strategy in south-east Asia.
In mid-March, Malaysia Aviation Group (MAG) recorded its first net profit in a full financial year since it was established in 2015 as part of the MAS Recovery Plan launched by state owner Khazanah Nasional Berhad. The group made a net profit of MYR766 million (US$161 million), which represented a significant recovery compared to the loss it reported in 2022 of MYR344 million ($72 million).
Announcing these positive results in late March, Izham said: “We are pleased to report that the group is poised for a remarkable comeback, solidifying our commitment to making 2024 the year of credibility.”
The recipe for this turnaround is based on sound business fundamentals, said Izham, giving credit to MAG’s 12,000 staff. Firstly, the group took the opportunity of Covid to reset its balance sheet in conversation with 75 of its creditors, slashing its liabilities.
Secondly, MAG took a view in 2021 on how the market would rebound post-pandemic, deciding that while it would fulfil its obligation to the nation as a national carrier on domestic services, it would bet on international market recovery. That is where it has focused its network rebuild, said Izham.
“Because of that bet, because of that foresight by the team, Malaysia Airlines is what it is today,” he explained, noting that the very high-yield environment over the past couple of years has helped it return to the black.
But will this high-yielding market continue? “Probably this is the last year post-pandemic we have healthy yield,” noted Izham.
Network expansion
Expanding on its current overseas expansion plans, MAS is focused on India and Australia and eventually China, he said. “India is a country we should watch. However, the conversation with the government of India is not going to be easy, especially on the metro cities.”
To circumnavigate this challenge, MAS launched three new Indian routes in late 2023 from Kuala Lumpur to the regional cities of Amritsar, Thiruvananthapuram, and Ahmedabad. These routes are performing ahead of expectations with 88% load factors and “most of it is a network contribution flow”, he explained. Another Indian destination is under consideration too, he noted.
Chinese traffic, aided by a visa-free environment, will pick up, said Izham. However, the group fields two products to tackle the Chinese market. “We know if you go into a market dominated by low-cost carriers with a premium product it is going to be tough,” said Izham.
Therefore, mainline carrier MAS will focus its activities on the four big Chinese hubs of Guangzhou, Shanghai, Beijing and Xiamen, with the group’s low-cost subsidiary Firefly deployed to secondary cities in China from Penang, Kota Kinabalu, Kuching, Kuala Lumpur International Airport (KLIA) and even Subang Airport.
The Subang opportunity
The question of the future of Subang is a controversial one in Malaysia. The airport was the city’s main hub from 1965 until KLIA was opened in 1998. Today it handles 1.5 million passengers with turboprop services, but Malaysia Airports is expanding the airport to welcome jet aircraft once again.
While MAG supports the Subang idea as “definitely serving point-to-point traffic”, Izham wants to ensure that it does not cannibalise the group’s hub operations at KLIA. “Our call to action for policymakers and the designers of Subang is to work with us to ensure they strike a strong balance between what the country needs and what industry needs,” he stated.
On the question of adding routes, MAS is “very cautious”, said Izham. It is thinking of restarting some of its former European routes, but he noted the airline “is more focused on tapping into markets that Malaysia Airlines specifically has not been before”.
Australian services are in the plan, said Izham. “Our plan is to mount three-times-a-day flights to Australia, [with routes to] Sydney, Melbourne, Adelaide and Perth, and we are going back to Brisbane soon.”
With “only 100 aeroplanes” in its fleet it is critical for MAS to form deep collaborations with other carriers. This allows it to extend its reach and promote those all-important flows of international traffic, he said. “Our partnership strategy has contributed close to 17% of our total revenue.”
MAS has codeshares with a host of oneworld carriers and others to help generate this revenue, and is looking at joint ventures, although a recent plan to do this with Cathay Pacific on routes between Malaysia and Hong Kong was nixed by regulators.
“The whole idea of joint business to a very high degree is nation building…to induce the market inbound into Malaysia,” said Izham.
The need for a strategic partner and investment is not on the discussion block at present though, he said. “MAS is not looking at a potential investor at this time, but I will not discount that in the future because if Malaysia Airlines continues for the next five to seven years with 100 airplanes and if you want to reach a far greater network, especially in Europe and North America, potentially the conversation will arise.”
In terms of the MAS fleet plan, at the time of Routes Asia the carrier had taken delivery of four Boeing 737-8 Max single-aisles out of an order for 25 of the type. Izham says the balance should be delivered by 2026.
The carrier is running a campaign to order a further 25 narrowbodies and evaluating whether to add more 737 Max aircraft or opt for Airbus A320neos, he said. “We’re looking for [a total fleet of] at least 50 narrowbodies and 50 widebody aircraft, inclusive of the seven A350s that we already have.”
MAS is also reportedly looking at whether to exercise its options for 20 more A330neos. It is scheduled to take delivery of the first of 20 A330neos in September as it begins to replace its A330ceos.
Izham’s vision is clear. “We aspire to be in the top 10 [airlines] in the world, top five in the Asia-Pacific,” he stated. “We are confident that if we continue this trajectory with our five-pillar business plan, Malaysia Aviation Group and Malaysia Airlines will be a totally different company by 2030.”
